IBD/TIPP Economic Optimism Index Hits 10-Month Low On TrumpCare

The IBD/TIPP Economic Optimism Index slipped to a 10-month low of 50.2 in July, as spirits among low-income households sank to their worst levels since the fall of 2014.

The index held just above the neutral 50 level, signaling optimism for the 10th straight month. Yet that's a big comedown from the 12-year high of 56.4 touched in February, when President Trump was in his honeymoon period and prospects for huge tax cuts and a massive boost in infrastructure spending were perceived to be much greater than they are now.

Below the surface, the latest IBD/TIPP Poll revealed pessimism about the near-term direction for the economy and deepening disillusionment with federal economic policies, yet a fairly rosy outlook for personal finances. While that combination seems somewhat incongruous, the consistent thread is that sentiment has clearly soured among people earning less than $30,000 a year, which is precisely the population that stands to bear the brunt of the TrumpCare plans passed by the House and introduced in the Senate.

Among this low-income group, economic optimism fell 1.4 points to 41.4 in July, the lowest since October 2014. Meanwhile, other income groups are either right near the neutral 50 level (49.7 for households earning $30,000-$50,000) or solidly optimistic, with optimism above 53 for households earning at least $50,000.

The poll, which included 900 respondents, was conducted June 23-29, a period dominated by coverage of the Senate TrumpCare bill and the Congressional Budget Office's conclusion that it would, over time, knock 15 million people off Medicaid and shrink the ranks of the insured by 22 million.

It's also possible that softer reported job growth is contributing to a less buoyant mood among modest-income workers as retail work shifts from a steady of source of job gains to a steady drip of layoffs. Retailers like Macy's (M) and Sears Holdings (SHLD) are among those closing stores and cutting jobs as they lose ground to Amazon.com (AMZN). The Labor Department reported 51,000 retail jobs lost in the three months through May, even factoring in job growth at nonstore retailers like Amazon. In 2016, retailers added 200,000 jobs.

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The Economic Optimism Index is a composite of three major subindexes that track views of near-term economic prospects, the outlook for personal finances over the coming six months and views of how well government economic policies are working.

In July, the gauge of the six-month economic outlook slumped 2.8 points to 48.4, falling into negative territory after hitting a four-year high of 56.3 in December. The 36.3 reading among households earning less than $30,000 was the lowest level since June 2013.

The six-month personal financial outlook index gained 2.8 points to 60.0, bouncing back after rising as high as 62.8 early in the year.

The measure of confidence in federal economic policies sank 3.2 points to 42.2, suggesting growing concern with the Trump administration. The index had crept into optimistic territory for the first time in a decade in February.

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